In the Green

Perfect Payment for Ecosystem Services Scheme?

A short while ago I was asked for an example of a perfect payments for ecosystem services (PES) scheme. A myriad of examples where things didn’t quite work out came to mind and I had almost resigned myself to the fact that a perfect PES may not exist, when I found a report called ‘The Vittel payments for ecosystem services: a “perfect” PES case?’

This Vittel case even received a mention in the recent The Economics of Ecosystems and Biodiversity (TEEB) report recently launched at CBD meeting in Bonn. This TEEB report has called itself the biodiversity equivalent of the Stern Review, aiming to evaluate the loss of biodiversity and the associated decline in ecosystem services worldwide. An ambitious aim, and the first phase report is disappointing but, since the Vittel case received a mention I was enthusiastic that I might be on to something.

Vittel is a very well known mineral water company; the UK consumes 80 million bottles a year. Originating at the base of the Vosges mountains in north-east France the water must be within quality requirements to call itself ‘natural mineral water’. Agricultural intensification in the areas surrounding the ‘grande source’ meant the Vittel brand name could be jeopardised if nitrate levels from fertilisers continued to rise. This was unlikely to be contamination to an illegal level, or dangerous level (nitrates in Vittel are 10 times less than tap water), but one that would damage the brand name; Vittel is characterised by a total absence of nitrites and low levels of nitrates.

To solve this potential loss of the brand name, Vittel created a PES scheme with local farmers. It abolished debt linked to land acquisition, provided subsidies to about 200 euros/hectare/year over five years, up to 150,000 euros per farm, free labour to apply compost to fields, and free technical assistance. All this plus long-term contracts to guarantee security for the farmers.

In this case study the link between the ecosystem service (water filtration) provided and the management practice was clearly scientifically established. There is one clear buyer, a number of sellers, and an effective intermediary institution. 100% of the farmers in the area accepted the 30 year contract and the scheme has eliminated 1,700 ha of maize land and kept Vittel as ‘Vittel’.

So it is, apparently, a successful example indeed, which is great. However, how replicable is this example? It took 10 years to develop, negotiate and implement this PES scheme involving only 26 farmers. All of parties were within close geographical proximity. Development included four years of intensive farm modelling and continuous on-farm testing. While there are no published total costs, Vittel spent 980 euros per hectare, per year, for the first seven years...

… will we be able to create similarly successful schemes for other ecosystem services when much of remaining forests and biodiversity is concentrated in developing countries? When deals are international? When we have more than 26 service providers? And, when there just aren’t enough resources left to take ten years to develop a PES for a single watershed! I hope that such significant investments of time and money will decrease as markets for ecosystems services gain maturity and experiences like this will aid in future project development. But, for now, the search for the perfect PES continues.

Selling Ecosystem Services: A pro-poor conservation solution?

A meeting held by the Forests Philanthropy Action Network and the Department for International Development in London yesterday did well to bring a growing concern to the front of people’s minds; just a shame that there were only a handful of people present.

The meeting, briefly covering the many issues of tropical forest conservation and the rural poor, focussed on the need for engagement of capital markets to realise the value of tropical forests. Academia, the public and private sector are beginning to promote this ecosystem service commoditisation as a method to not only conserve forests but also to reduce poverty in developing countries. On the surface it appears to make sense; depletion of natural resources and poverty often occur together. The development of a market generates revenue for previously “free” ecosystem services. Deliver the funds to those who provide the service and you’ll get poverty alleviation. But this seems more like an ideal, designed to help sell the idea to the policy-maker or consumer, rather than the reality.

Thinking beyond the lifespan of most well-meaning NGOs, will rural communities in developing countries have the capacity to deal with these markets for ecosystem services? Meeting conservation and rural development goals concurrently isn’t straightforward. The Integrated Conservation and Development Projects, appearing since the 1980s, taught us that those living near to projects must have a high level of input in their design and implementation, and sufficiently clear links between conservation and social benefits must be made to secure success.

To take an example, consider payments made for CDM or voluntary carbon market projects in developing countries. It is highly unlikely that the average rural community will have sufficient capacity to deal with issues of additionality, leakage, permanence and management demanded by stringent compliance market conditions and emerging voluntary market standards. It is, arguably, just as unlikely to get private sector consultants and project developers to assess exactly what the local community’s needs and aspirations are. It is more likely we’ll try to implement projects claiming development benefits so that they sell and then shrug our shoulders as marginalised community members get poorer, or indigenous people lose customary property rights.

Those designing markets for ecosystem services need to carefully consider what the project is designed for. Is it compensation for the opportunities forgone? Is it to make tangible poverty reductions and contributions to development? Or, is it merely charity to the local communities that obscure potential implications of, for example, restricting resource access? If it is the first, we need much better ways to calculate opportunity costs before we do more harm than good. If it is the second, we must learn from community based resource management approaches and invest time and effort to establish best practice guidelines. If it is the third, then how long can we really get away with it?

New paper challenges solar-cloud cover link

Some may remember that a key premise in the Great Global Warming Swindle was that climate change in the last century was not primarily driven by CO2 (or at all, if you listen to the narration carefully), but by changes in solar activity. The contention was that the mechanism was via cloud cover. Changes in solar activity moderated the amount of cosmic rays reaching the Earth. These cosmic rays were hypothesized to ionize particles in the atmosphere, and produce clouds. When solar activity resulted in fewer clouds, the Earth warmed up. The hypothesis is fully described in The Chilling Stars.

A recent paper in Environmental Research Letters challenges the solar-cosmic ray-cloud cover link:

A decrease in the globally averaged low level cloud cover, deduced from the ISCCP infrared data, as the cosmic ray intensity decreased during the solar cycle 22 was observed by two groups. The groups went on to hypothesize that the decrease in ionization due to cosmic rays causes the decrease in cloud cover, thereby explaining a large part of the currently observed global warming. We have examined this hypothesis to look for evidence to corroborate it. None has been found and so our conclusions are to doubt it. From the absence of corroborative evidence, we estimate that less than 23%, at the 95% confidence level, of the 11 year cycle change in the globally averaged cloud cover observed in solar cycle 22 is due to the change in the rate of ionization from the solar modulation of cosmic rays.

The issue isn't new, of course. See the IPCC AR4 CH2 p193:

[The] cosmic ray time series does not correspond to global total cloud cover after 1991 or to global low-level cloud cover after 1994 (Kristjánsson and Kristiansen, 2000; Sun and Bradley, 2002) without unproven de-trending (Usoskin et al., 2004). Furthermore, the correlation is significant with low-level cloud cover based only on infrared (not visible) detection. Nor do multi-decadal (1952 to 1997) time series of cloud cover from ship synoptic reports exhibit a relationship to cosmic ray fl ux.

However, there appears to be a small but statistically significant positive correlation between cloud over the UK and galactic cosmic ray fl ux during 1951 to 2000 (Harrison and Stephenson, 2006). Contrarily, cloud cover anomalies from 1900 to 1987 over the USA do have a signal at 11 years that is anti-phased with the galactic cosmic ray fl ux (Udelhofen and Cess, 2001). Because the mechanisms are uncertain, the apparent relationship between solar variability and cloud cover has been interpreted to result not only from changing cosmic ray fluxes modulated by solar activity in the heliosphere (Usoskin et al., 2004) and solar-induced changes in ozone (Udelhofen and Cess, 2001), but also from sea surface temperatures altered directly by changing total solar irradiance (Kristjánsson et al., 2002) and by internal variability due to the El Niño-Southern Oscillation (Kernthaler et al., 1999). In reality, different direct and indirect physical processes (such as those described in Section 9.2) may operate simultaneously.

Climate policy and avoided pollution control

I'm currently finishing up a draft of a paper titled European climate policy to 2030 and avoided costs of air pollution control. The background of the paper is that climate policy will reduce air pollutant emissions, and consequently reduce the need for end of pipe (EOP) pollution control measures. EOP measures have been the mainstay of pollution control in the last few decades, and include particulate filters, catalytic converters, and flue gas desulphurisation.

Air quality targets will be set in future, regardless of climate policy; but with CO2 abatement they will be "cheaper" to meet. The goal of this paper, then, is to quantify the avoided costs of EOP measures arising from climate policy, and compare them with the costs of climate policy. Why is this interesting? If the savings from avoided air quality policy are non-trivial compared to climate policy, it could increase the political feasibility of climate policy.

The paper uses a top-down computable general equilibrium (CGE) model. (And yes, I know, CGE is terrible.) CGE studies in the co-benefits field have largely presented results in terms of reduced air pollutants or monetized health benefits from climate policy. This is because CGE models are generally very aggregated with respect to sector inputs and outputs, and lack specific technological detail. To do the avoided cost analysis, I've had to make some novel modifications in order to introduce EOP technologies into the model. At the moment, I've only included PM2.5, NOx, and SO2 emissions from stationary sources - those which use EOP technologies.

So what are the preliminary results?

Assuming the Kyoto Protocol is achieved in 2010 (with all reductions undertaken at home) and the NEC Directive goals are also achieved, the avoided costs of EOP expenditure is 15% of the CO2 abatement cost in 2010. (All costs annualized.) This is in a similar range to work by Syri et al. [Energy Policy 29 (11), 871-884.], who put the number at 20% - albeit with additional pollutants and a different model.

The uncertainties of future climate and air quality targets beyond 2010 mean that I have used two alternative climate and air quality policy scenarios to undertake the analysis. For 2020, with climate policy at either Kyoto Protocol levels or a 20% reduction, and pollutants kept at NEC levels or reduced by 10-20%, the "saving" works out between 4-10%. In 2030, the saving falls to 2-4%.

These numbers are still up for adjustment as I do more model runs for the draft. I'm presenting the savings in terms of total costs, because it is not possible to undertake marginal analysis when you have two separate abatement activities going on (someone correct me if I'm wrong). But a patterns emerges: the size of the avoided expenditures falls as both climate and air quality targets become more stringent. This is in part because the marginal abatement cost of CO2 abatement is rising faster than that of air pollution abatement.

So what do the results mean for air quality and climate policy in future? Firstly, it is evident that air quality targets need to be set in the context of this kind of analysis. Climate policy can make more stringent air quality targets cheaper and technically feasible. Secondly, and highlighting that we shouldn't start double counting these benefits, climate policy can become more politically feasible if it is understood that CO2 abatement is causing savings in other environmental policy domains. This co-benefit is largest in the early years (next decade or so) - conveniently when political inertia to get climate policy going is at its highest. Thirdly, just because savings are being made in the aggregate economy, it doesn't mean that some portions of the economy aren't still losing out. This raises political issues that will still need to be sorted out.

The CO2 economy?

Some clever folk from Denmark have just published an article on experiments with an SOEC, picking up on research in this area that was discontinued in the early 1990s. An SOEC is a Solid Oxide Electrolytic Cell, which works a bit like an SOFC, but backwards.

Essentially, you put in H2O and CO2 and get a highly efficient conversion to syngas (CO + H2) using an input of electricity. Syngas can be catalysed to excellent transport fuels such as FT-diesel and the electricity can be renewable. The researchers have even provided some preliniary cost estimates, which look great, but they had to admit to struggling to find a reliable price for 'renewable CO2'.

I instinctively like this kind of technology; it's clean, it's flexible, it's modular, and it could make FT chemicals environmentally acceptable. Unfortunately I'm struggling to think of  a source of renewable, pure and available CO2. Bearing in mind that gasification of fossil fuels or biomass will produce syngas anyway, removing the need for the SOEC, I'm stumped. Any suggestions?

Outsourcing emissions

A quick post, and a good follow-up to Miles' previous entry. I subscribe to Google News RSS feeds, and while I get a lot of new headlines every day, once and a while one will catch my eye.

This article in the Wall Street Journal highlights how difficult it is to account and attribute carbon emissions in an interconnected and globalised world. It raises important questions about how we should look at the emissions we are ultimately responsible for - many of which are beyond our own borders. We in the West have avoided inflation in the recent decades by outsourcing production to places like China and India; in doing so, we have outsourced our emissions as well. When a product is exported, it leaves behind at the border the emissions associated with its production - emissions which are then tallied onto the source's annual emissions inventories.

A recent study by researchers at the Norwegian Technical University has tabulated the carbon emissions embodied in exports across the world. The figure below highlights that approximately 23% of China's annual emissions are actually embodied in goods/services that are eventually exported.

This number is actually quite staggering - and raises questions about how we should bring in China (and other production centers) into post-Kyoto climate agreements. And importantly, how do we decide who should pay for the reduction of this share of emissions?

Of course, a global carbon tax offers a simple solution. But given that it is unlikely to be politically feasible, second-best solutions may be necessary - like a border-tax adjustments such as those proposed by Sarkozy recently.

Interesting stuff.

Biofuels saga, a new chapter: ALGAE

Couple of days ago some of us attended an interesting talk of Alex Farrell on Technologies and governance for a sustainable biofuels industry.

I quite liked how he grouped the biofuels crops, basically in function of the relative land use:
1. arable land crops (such as soy, corn, palm etc)
2. degraded land crops (such as jatropha – see previous post)
3. crops which requires no land (such as algae)

Needless to say, he pointed out that a sustainable biofuels industry should focus research and efforts on crops belonging to groups 2 and 3. He also gave some sort of technological roadmap for such crops use in biofuels production, which sounded relatively optimistic, at least to a non biofuel expert as I am. And this sounded to me even nicer, because, as it happened a while ago with jatropha, I’m increasingly bumping into news about the use of algae as biofuels, such as  this or this.

Biofuels people, what are your views on algae? Are they really so efficient and sustainable biofuels crops as they sound (at least in theory)? Any already known problems and possible side effects? costs and future prospects?

Ethical shopping is just another way of showing how rich you are

An article published by George Monbit in the Guardian has started a good debate about ethical shopping. The main argument of the paper is that ethical shopping is in danger of becoming another signifier of social stature. He also underlines that being an idealist environmentalist or trying to live like one is not realistic, and more often than not instead of helping us solve the problem it just makes us feel better!!

“I have met people who have bought solar panels and wind turbines before they insulated their lofts, partly because they love gadgets but partly, I suspect, because everyone can then see how conscientious and how rich they are”

Greenism is creating a new economy and lifestyle; therefore, it is now marketable. Do you think this will really help to solve the problem? In turn middle class consumers pay a sort of voluntary green confession fee by buying from companies with alleged green credentials.

I would argue that the only way to actually change things is to remove the voluntary aspect of environmental shopping – if fair trade is good then the laws should be modified to only allow goods that have guaranteed workers rights etc included in their product history.  On top of this we have to reduce total consumption – revolution?

The article by George Monbiot was well thought out, and well argued.  However, it is not easy to identify the problems with consumerism; that wouldn’t help us to solve the problem. We have to be more realistic and objective about environmental issue. The life style such as individualism is dictated by the economic culture in the western world. If people have the purchasing power they can do whatever they like; this is free capitalist world. As George mentioned that we need to change our consumption habit and we have to be more realistic to act together.

Climate Warfare

Just saw this article based on recent research in China which suggests - somewhat unsurpisingly - that climate change has been the cause of war for thousands of years. I post this only because such historical analysis is far too uncommon in my opinion.

What's the beef? (or ビーフは何であるか。? as they say in Japan)

It's been mentioned before on these pages, here and here, and now results are available from another proper study.  The New Scientist reports on a study by Akifumi Ogino of the National Institute of Livestock and Grassland Science in Tsukuba, which takes a Life Cycle Assessment approach to the emissions-from-meat vs. emissions-from-cars debate.

(the study can be found at DOI: 10.1111/j.1740-0929.2007.00457.x).

In their conclusions they combine the results of their study of the Japanese cow-calf system with another study on the fattening of calves to 28 months (Ogino et al., 2004). And what they come up with is a whopping 36.4kgCO2(eq) per kg of beef produced. And this is excluding transport!

The New Scientist tells us that:

"a kilogram of beef is responsible for the equivalent of the amount of CO₂ emitted by the average European car every 250 kilometres, and burns enough energy to light a 100-watt bulb for nearly 20 days."

Or, the difference between a Prius and a RAV4 over 20000 miles/year is equivalent to cutting out a 0.5lb burger a week for a family of 4. And a Prius costs more for emissions reduction whereas cutting back on meat will save money.

But does 36kg seem realistic? Previous studies on food have found the following GWP values:

• 8.8kgCO2(eq) per kg of Swedish semi-hard cheese (Berlin, 2002).
• Approximately 1kg CO2(eq) per kg of milk in Northern Europe, with organic milk having a slightly higher emissions level than conventional (de Boer, 2003).
• 1.5kgCO2(eq) per kg Irish milk (Casey and Holden, 2005).
• 2.3-3.97 kgCO2(eq) per kg pig meat in France, with the highest figure arising from organic production (Besset-Mens and van der werf, 2005).

All this seems to suggest that:

1. Our meaty diets remain a hidden environmental menace that we don't change despite having a financial incentive to do so, preferring instead to invest in things like eco-cars that can be shown off.
2. Life cycle assessments are still very difficult to compare. The ones reported here have different treatments of transport, direct CO2 in animal raising, and enteric CH4 (guffing). If LCA is to become a reliable policy tool with sufficient ability to persuade people then some level of standardisation or method of meta-analyis will be required.
3. The field of organic (livestock) farming is further muddied by results that show it have higher emissions.

At least there is a greater wealth of data on these indirect environmental impacts, which will be invaluable for helping us sift through the deluge of consumer choices. It also indicates that changes in the types of food that are eaten will have more positive impacts than discriminating between different shades of the same meat or produce. Could be an inconvenient truth for the mushrooming trend in guilt-assuading, hand-wringing, fair-trading, middle-class, organic wine, coffee and chocolate business.

Investment Risk in Regulated Electricity Market and Insurance Cost

Improving the efficiency of electricity supply market becomes more challenging after the regulation of the electricity market in many countries. Investment in electricity supply industry requires huge capital cost and long period of constriction in order to power plants operate to generate electricity. New investment in power generation technologies will improve economic efficiency of the electricity market. Furthermore, investment level, investment time and investment in right technologies are also playing a very significant role in economic efficiency of the market. Much of the focus has been on whether the overall level of investment in generation capacity has been adequate to ensure security of electricity supply.

Liberalised electricity market and investment risk have affected technological choices in power generation. One of the important questions is that in the regulated market, how investors able to adapt the investment risk, and what sort of risk they have to deal?

If consumer and investors are risk averse then investment is efficient only if investors in generating capacity can sign long-term contracts with consumers. Otherwise the uncovered price risk can increases financing costs, reduces investment levels, and influence investment decision to adjust from the high capital cost technology to the less capital intensive generation that will reason reduce consumer utility.

Risk in power investment is varying in each different type of technologies and fuels. Thus even when levellised costs are equivalent and technologies are commonly proven, different risk profiles of different technologies can influence the choice of power generation mix, the range of technologies offered, and the strategies for their development and operation.

Financial/ Business risk

• Economic factors: such as demand risk on electricity consumption though time and long-term of electricity consumption pattern.

• Political risk: This also includes economic and non-economic risk i.e. price cap police.

• Investment risk: Technological chose leads to pressurises the investors to choice right level of investment in new technology in order to make efficient economic investment to manage fixed and operation cost.   

• The price risk: Highly volatile electricity market price risk is the important to consider, unpredictable electricity prices and fuel cost will be the hard to deal in such a complex market.

• Fuel availability and volume risk.

• Competitiveness of other investment companies.

• Technological failure, and delay in construction period.

• Carbon tax risk: emission control scheme can cerate an uncertainty to invest some of the technologies, such as hard coal power technologies.

• Financial risk involve with level of investment return risk anticipated by investors.

After the regulated electricity market, insurance becomes important tool to deal electricity construction and transmission sector risk, as well play an important role to deal variety of risk related to this sector. The insurance obtained in the electricity sector is designed to reduce liability, not prevent catastrophic or terrorist related damage to the electricity infrastructure. Insurance offerings in the electricity sector covers generation much more comprehensively than transmission and distribution. Transmission and distribution insurance products are difficult to generate because of jurisdictional issues.

A risk-averse individual would be willing to pay a premium above the expected value of loss in order to remove risk by purchasing an insurance policy. The maximum an individual is willing to pay above the expected value of loss is known as the risk premium.

What Do Insurers Prefer Not to Insure?

The weather risk  and  Terrorism

Burning wood to power fridges!(?)

Potentially revolutionary bit of kit has pumped out a press release that has spread across the web pretty quickly: a multipurpose stove for cooking, refrigeration and electricity. Just goes to show how forecasting technological change through empirical trend plotting cannot account for the wiley inventive spirit of the bespectacled British inventor! (apologies for stereotype).

Link 1   Link 2

Magic! But does it beat the mighty Trevor Baylis with his Clockwork Radio?

Transformative Finance: The Other Side of the Coin

I hate 'coining phrases'. Mainly because they have been said thousands of times before anyone coins them. But, this time I see no alternative. You see, I've been struggling with ethical and sustainable finance for several years now and something just hasn't sat right. The problem is that with £425 billion in ethical funds this still only represents 1.2% of total assets under management. These funds are mostly negative (do less wrong) or positive (do good) screens. But that leaves Downright Dirty Plc to access the other 99% of the equity market. Its hardly a hardship, is it?

This means that naughty companies have little pressure from investment funds to be nice. Equally, nice companies are likely to be mostly attracting investors that don't give a damn about their 'carbon footprint' or 'community involvement strategies'.

So what's this phrase that's been said a thousand times before: transformative finance. To me this means the investment in a specific enterprise to make it more sustainable. This works best for smaller enterprises, which lack capital and expertise to become sustainable, but have the desire. It means no company is excluded and so each investment makes a real difference by bettering the bad ones, not just safeguarding the best.

To be fair to the fund managers, some do already have 'engagement policies', which can extent to using voting rights to force a company to integrate sustainability into their business model. Though usually it stops at ensuring 'good governance' as in not 'doing an Enron'.

My research for the last 3 years has been on the potential for transformative finance vehicles to increase the innovation of sustainable technologies within enterprises. I'm very happy to answer any questions on the subject or hear if you're in a similar field.   

 

Putting the carbon market on firm ground

Watching the EU emissions trading market collapse from around €30/tonnne CO2 to less than 5€/tonne, quite a few investors are probably still smarting what they were thinking when dishing out enthusastically on those early emission permits.  The reasons for the price collapse were of course the intransparent distribution methods for free distribution rights in the various member states, coupled with an unrealistically high baseline against which reduction targets were easily achieved, if not surpassed.

On the one hand, such lapses can be put down to natural teething problems of an emerging new market. Yet, carbon, being an artificially created commodity by government mandate, is now seen as an inherently risky asset to invest in, since you can never guarantee that individual states will not try and tilt the market to their own advantage. And the EU has quite a track-record of such myopic interventions.

Recently, two possible solutions have been proposed, paradoxically one getting the governments more involved in the market, and the other essentially banning them from any intervention.

Dieter Helm and colleagues at Oxford University have outlined the second option in a recent paper in the Oxford Review of Economic Policy. They essentially propose the introduction of a carbon bank analogous to a central bank watching monetary policy. While central banks control one policy variable - the interest rate - to ensure the outcome of one policy variable - inflation - a carbon bank would be in control of either a carbon tax or a quota of emission rights in order to achieve a government-mandated (and hopefully scientifically-informed) outcome of CO2 reductions over time. The main advantage of such a system is its credibility and its transparency. Governments would have no role in meddling with the allocation of emission rights or the level of a carbon tax, while the carbon bank would have an incentive to maintain its credibility by setting the respective levels according to what is needed to achieve the required reductions in emissions. This would give investors the confidence to invest in the right level of emission reductions, as they do not have to fear that governments will renege on their earlier pledges. Furthermore, a central control of emission allocations ensures that market participants know exactly how many permits are in circulation and can calculate their own requirements accordingly.

An alternative approach has been put forward in a paper by Karsten Neuhoff and Roland Ismer of Cambridge University and Munich University respectively. They propose that governments offer long-term put option contracts on the price of CO2 allowances in order to provide a firm price commitment in the market. The put options give investors the right, but not the obligation, to sell allowances to the government at the strike price. Towards the investors, the government is therefore fully committed to a price floor for future allowances. This in turn will again allow investors to determine the optimal level of CO2 abatement without running the risk of time inconsistencies in government policies.

Both approaches offer a radical yet complete solution to the time inconsistency problem in carbon policy. Given the inherently political nature of the carbon market, especially if implemented at a global scale, some form of investor insurance against regulatory risks seems to be paramount. While a central carbon bank seems to be still a bit far off, selling put options on future CO2 allowances seems to be a small step for governments to make, while representing a huge leap for a stable future carbon market.

Returns not Payback Periods, please!

Does a payback period of 5 years sound like a long time? How often have you heard of clean technology companies being cagey about their payback periods for things like micro-wind, heat pumps and energy efficiency measures like loft insulation? Having been an avid fan of ‘Dragon’s Den’ it might just be that some of these start-ups just ‘aren’t good with figures’.

Its more likely that they don’t like talking in terms of years to payback or ‘break even’. Talking about money in years spells risk and hardship. The term also forgets that the ‘payback’ will continue after the ‘payback period’, turning into a good old-fashioned profit; instead people think ‘I have to wait x years just to get my money back’. It really annoys me, its such a negative way of selling something.

It also assumes that the technology has zero value once installed, patently untrue. Even cavity wall insulation, which has little intrinsic value, will add to the value of a property, particularly after July with the introduction of home energy ratings. Solar panels lose little value once installed, only the installation costs are lost on day one. In a new build, these costs are minimal and these can add more than their cost to the value of a home – nearly 9% (Guardian).

To me, its much better to think of it in investment terms, the financial sector agrees. Ever heard of Nationwide talking of payback periods? No? that’s because savings and bonds are advertised in annual interest rates. Mutual funds are sold on the return over the last 5 years. Are banks and fund managers better at selling than clean tech firms? Yes. Let’s compare: a long term savings bond at 6% compounded annual interest would have an equivalent payback period of 12 years. Not exactly inspiring.

Also, and I haven’t seen much made of this at all, remember that money saved isn’t taxable income. So, to a higher-rate taxpayer, this bond has a 28-year payback, a lower-rate payer would wait 25 years to ‘break even’. Ouch.

So, what if common clean technologies were sold in terms of annual rates of return on investment instead? Well we have…

energy efficient lighting at 240% (Energy Savings Wales)
cavity wall insulation: 50% *
loft insulation: 100%*
draughtproofing: 25% *
hot water cylinder jacket: 200% *
ground floor insulation: 30% *
Solar thermal: 6.6% (Guardian)
Solar PV: 4.7% (Guardian)
Microwind (Swift): 12.5% (BWEA)

* Plymouth City Council

Remember, these are all ‘tax free’, the best high street savings accounts pays 4.2% net of basic rate tax.

So, please, clean energy companies of whatever ilk, start talking about annual return on investment and ditch the payback period, or Mel'll have ya.

Change the free trade to fair trade.

“You see these things differently if you come from a developing country”
-Neth Dano, Searice (NGO). Philippines

“As long as I’ve eaten and filled the tummy, what happens next I leave to God”
African saying

The proverbial visitors come from Mars to the planet might have some difficulty understanding the way that earthdwellers connect food and trade. Food is the most basic need of these people, they might reason, yet they have subordinated this to the rules and regulations of international trade. If a county wants to pas laws thet enable it to feed its people, and those laws are not consistent with so called “free trade”, that are disallowed.  Second question would ask by visitors why planet Earth is so divided, with a small number of rich countries but a much larger number of poor countries. They may scratch their heads at why countries that are poor, with so many hungry people, seem able to grow food quite abundantly on their land. But – and this is where the real puzzle set in- countries that millions of hungry people are exporting food to countries where people are already well-fed. Why? What kind of system is this? 

We said it is called capitalism and they have the answer to this big WHY?  Well, it is all to do with ‘purchasing power’  So, basically people living in rich country have the purchasing power, to buy food from poor countries, which people in those countries do not have.

The account of trade and food security begins in the United States costal city of Seattle. Trade for agriculture ministers had gone there in November 1999 for a meeting of the World Trade Organisation (WTO) that was intend to further the cause of trade liberalization. Yes as the meeting took place there was monitoring evidence that such liberalization was failing the most vulnerable members of the global society. To the bewilderment of trade liberalisation advocates, the Seattle talks collapsed and did not so in quite speculator fashion.

Basic factor form these project is that trade liberalisation, especially as it affects the food security of the poor. The old argument that free trade will benefit all of us has been proved wrong by the experience of the late twentieth century. While most have gained, the poorest, 800 million hungry people, have lost. Any society, national or international, will ultimately be judged on whether its system, rules and regulations assist the most needy. By that criterion, the current international trade system is failing. The poor cannot exist on bread that might come one day.

People go hungry because they are too poor to grow enough or to buy enough food. Poor soil, desertification, the neglect of women farmers, disasters, lack of spending on agriculture, foreign dept, conflict, lack of democracy, climate change, population and land issues, loss of crop diversity, inadequate funding for health, and the way the fisheries are under attack. The international community, like many national governments, is failing to accord priority to tackling these problems.

Economic globalisation and trade liberalisation have concentrated power in the larger entities we know as transitional corporations. Small farmers are unable to compete in the global economy and are being driven off their land, leaving the door wide open to the corporations.   

  Trade liberalisation has failed the poor and stands in danger giving trade as a whole a bad name. The poor are going hungry because of the way the trading system is working. Trade liberalisation – “free trade, trade without barriers – is harming, not helping them. Instead on relying on free trade dogma, Western governments would do well to look more at what actually works to advance food security.

We want to change free trade to fair trade, under fair trade; the actual producers receive a higher return that gives them the opportunity of becoming food secure.

Reference: John Medley, Hunger for trade, Global issues. 

Into the great wide open

Here are some interesting facts about ethanol (all subsequent figures are from the presentations at this IEA workshop): It is currently eight times more efficient to produce a litre of ethanol from sugarcane than from wheat or maize. A litre of ethanol can roughly replace 0.9 litres of gasoline in a conventional car. Brazil is currently the world's largest producer and exporter of ethanol, increasing its production from 10,000 million litres in 2000 to more than 16,000 million litres in 2005, all of which comes from sugarcane.

Now, besides all the environmental and security-of-supply benefits for western countries, this is actually massively important for developing countries in terms of building their own industrial capabilities. Brazil has spent over $500m in the past decade researching and developing sugarcane growing and refining technology domestically. There are currently at least 1m people employed in this sector. Petrobras has modified its pipelines so that decentralised sugar-refineries can deliver ethanol to demand centres and international ports. All this allows a diversification of the sugar cane industry, making it more resilient to price shocks in the conventional sugar markets.

In 2004, Brazil satisfied approximately 15% of its transport fuel demand through ethanol, using up just 5% of its total cultivated land. Sales of so-called "flex-fuel" vehicles, which can run on any combination of gazoline and/or ethanol in the tank, make up more than 50% of all new vehicles in Brazil, thus reducing its import dependency on foreign oil. Furthermore, ethanol from Brazil is now cost-competitive with oil at a price of around $35/barrel and several equatorial African countries have recently invested in their own ethanol production facilities.

All this throws up some questions, which have not really figured in the debate around ethanol yet. Firstly, do we need to satisfy the EU biofuels directive (requiring a 5.75% share of biofuels in total vehicle fuel sales) solely through domestic production? Importing biofuel from emerging economies such as Brazil and Africa is both cheaper and more energy efficient in terms of the crop yield, not to mention the international development benefits. Recent scare stories have focused on tropical deforestation due to biofuels production, but drawing up international standards in this area should be straight forward. As the Brazilian experience shows, growing ethanol from sugarcane does not need to harm tropical rainforests and can provide an avenue of economical development for hundreds of thousands of farmers.

Secondly, why do all the international car manufacturers offer flex fuel vehicles in Brazil, while telling their European customers that these cars are technologically challenging and not practicable. Oil dependence starts at the pump, and as long as the customer does not have the choice whether to fill up with gasoline or ethanol, oil dependence remains absolute. Innovations can be demand driven, but as can be seen in the case of hydrogen, infrastructure technologies often face the chicken and egg problem - flex fuel vehicles will only arrive, once ethanol becomes widely available, while ethanol will only be widely available once flex fuel vehicles have arrived. Making flex-fuel technology mandatory (it is really just a technological add-on to a conventional car) should not increase car prices but creates the necessary conditions in which we can then discuss the introduction of biofuels proper.

The good old Soviet days...

The Soviet days are over. Freedom and the capitalist «survival of the fittest» ideology have reached the remotest places of the ex-USSR. Although with regards to freedom and civil society Russia is certainly going backwards and countries like Uzbekistan remain communist, just on a smaller scale. But generally the view is widespread that both politically as well as environmentally things are better today as they were in the Soviet days.

Who likes to think back of the Aral Sea disaster, brought about by Khrushchev's marvellous idea to increase cotton production by ploughing up the Virgin Lands? Or Chernobyl? Or Baikonur? Or Barsa Kelmes, the biochemical research station on what was once an island in the Aral Sea? Or the extinction of Preszewalski horses in the wild (now successfully reintroduced)? The list of less publicised environmental disasters is sheer endless, some areas are still completely closed off. Yet, I would like to argue that we are in the middle of a second post-Soviet environmental disaster phase, albeit of a slightly different nature, and the worst days might well be ahead.

Central Asia is a ticking time bomb. In the background, Russia, the US and China are fighting over the vast amounts of natural resources. Big oil, gas, mining and construction companies provide the funding to exploit further and further, fuelled by rising market prices. But by natural resources I do not only think of oil, gas & minerals, but also any sort of wildlife with a market value making the harvest profitable. The flood gates for extreme over-exploitation were opened by the collapse of the Soviet Union in 1991. The resultant severe levels of unemployment and poverty, coupled with a lack of law enforcement and corruption on all levels, as well as the sudden access to international markets, have lead to high harvesting rates, irrespective of illegality. Nursultan Nazarbaev, the Kazakh president, is leading by example. Some people say that he will sell everything until there is nothing left of Kazakhstan.

The list of endangered species is long, but what makes Central Asia stand out is the rate at which species decline. My study species, the migratory Saiga antelope (photo), has declined from over 1 million animals to less than 40.000 in ten years – a > 95% decline! The high poaching activity is fuelled by demand for the saigas horn, which is used in Chinese traditional medicine. But saigas are not alone, any species with a market value has declined at a ridiculous rate - from the «luxury goods» such as Saker falcons and Bustards, popular especially in the Arab world, down to the meat supplying species such as Goitered gazelle and Kulan, a type of wild donkey. Firewood, but even roots and mushrooms that used to be common are now dissappearing due to soaring demand, especially from China. But due to a lack of data, we only know about the «tip of the iceberg» species.

A great deal of monitoring and research is needed to find out what is happening. Improved law enforcement is required both nationally and internationally, but at the same time there is a need for bottom-up initiatives through and with local communities (e.g. see our webpage http://www.iccs.org.uk/). In my next blog contribution, I will assess what chances the current economic boom in Kazakhstan brings and what legal and international milestones have been achieved, for it is not all doom and gloom and maybe we should be pleased that the Soviet days are over…

Hanging out with the hangers-on

This week, somebody suggested to me that I write about my experiences doing ‘fieldwork’ in Argentina. And why not? Makes a change from fretting about carbon footprints at least. My research concerned the electricity market reforms, and the changes taking place in the post-crisis era (since 2002). To achieve this I felt it neccessary to spend a year living in Buenos Aires where, among other things, I interviewed about fifty individual stakeholders - from the 20th floor office of the company executive to the cramp confines of the urban slums. Getting access into either of these places wasn’t as easy as I had imagined, though I was certainly made more welcome by the city’s poorest residents who were keen to tell me their stories. Thinking about the people I met in the Villas (slums), I thought I’d expand a little on how electricity market privatisation has helped to perpetuate the marginalisation of these precarious communities.

But first, a bit of policy background. In 1994, two years after privatisation, the Government introduced the so-called ‘Four-Year Framework Agreement’ (Acuerdo Marco) which constituted the most significant ‘social’ policy intervention to the privatised electricity distribution market in Buenos Aires. Essentially the agreement was a compromise deal struck between the federal government, various municipal (local) governments and the private electricity distribution companies following the latter’s failure to cope with the financial cost of supplying the illegal ‘hangers’ in the city’s Villas, whose consumption is diplomatically referred to as constituting a ‘non-technical market loss’. It should be pointed out that at the point of privatisation, non-technical losses throughout urban Buenos Aires averaged a staggering 27% of the total megawatt hours (MWh) supplied by the state-owned utility, SEGBA. Rapid reductions in the number of illegal connections were achieved in the years following privatisation via the systematic cutting-off of supplies to households or businesses found ‘hanging’. However, the city’s Villas were highlighted as no hopers, largely on account of the precarious and informal nature of the housing which limited or ruled out the possibility of establishing formalised legal connections, but also as they are discrete centres of conspicuous poverty and politicised opposition to the company’s policy of cutting off supplies.

Crucially, this agreement - which sees local and federal government as well as surrounding consumers subsidise the cost of supplying the Villas - was initially intended to be a short-term (4 years) policy, ostensibly to ‘bridge’ the transition to formalised connections. However, it was officially extended for another four years in 1998, and, coinciding with the wake of the economic crisis in 2002, implicitly extended again as part of the wider market ‘freezing’ via the emergency legislation. Given the post-crisis growth in the number and population of Villas, and the now seemingly normalised or enshrined 4-year agreement, this arrangement is key to understanding the access, affordability and quality of electricity received by some of the city’s poorest residents who more often depend upon electricity for heating and cooking since they remain unconnected to the gas grid, and often cannot afford the higher-priced bottled gas.

Importantly, the agreement abdicated the private distribution companies from the responsibility of establishing or maintaining safe and secure household connections within the slums (despite receiving payment from the state), on the grounds that these are illegal consumers without a registered account. This just means that residents have to do the job themselves. On one of the occasions I visited ‘Villa 31’ it was a cold winter morning and the power had been knocked out in over half of the slum as electric heaters had overloaded the ‘grid’. I was standing about with a group of men discussing the situation, but after 3 hours of waiting for ‘the guy who knows how to fix this’ one of my contacts (see photo) decided to take matters into his own hands and replace the fuse himself. I asked him if he knew what he was doing, since it looked like a pretty high-voltage connection, but just said ‘it’s okay, I’ve seen this done before, shouldn’t be too difficult…’. Luckily he was right, and within a couple of minutes the power was back on and fellow ‘hangers’, women mostly, came from nearby houses to thank him and to curse the government and the supply companies - just for good measure.   

Energy hedge funds

Investment banking sector has strong interest to the energy sector. Well, energy is a risk business. While many energy funds concentrate mostly on price risk, there is almost unlimited risk in the physical-oriented energy business. There is operational risk, geopolitical risk, political risk, regulatory risk, weather risk, environmental risk, tax risk, and other risk that add multiple dimensions to the more linear and traditional thinking of hedge fund land.

The fact is that energy is the new way for the investors, and it is already experiencing hedge fund market maturation dynamics. That is some funds already blown up last year coal and electricity, experiencing warm weather has slow down gas and oil market. But overall energy commodities have a good shape for traders. The reason is simply price volatility can provide huge profits to investors. Energy traditionally has exhibited high price volatility, and today is exhibiting more than historical levels of price volatility across the complex.

Power trading is an attractive business, but power trading is particularly fraught with unexpected risk. Power is mostly real time commodity and non-storable, limited and expensive to store, therefore, hard to stabilise prices. Demand is equally difficult to predict as anyone in the load profile and forecasting business can tell you. Electric power trading is best performed with generation assets today and a detailed understanding of the market and its risk and complexity.

Volume risk is also a crucial point for investors to consider. Volume risk, is related to the need to actually deliver the commodity at some point and its about the risk implicit with being unable to deliver or produce the commodity.

Energy fund arena is ramping up due to the need for higher returns for hedge fund investors. Energy funds are still only about 7% of the hedge fund universe, but continue grows in US and Europe predominantly. London and New York is becoming two major cities for both energy trading and energy hedge funds.

Investing their fair share?

Recently, I have been studying the investment plans of the big electric utilities in Germany, Spain and the UK for the next few years. Judging by the corporate images from these companies' websites and other PR material, I had expected some serious Capital Expenditure (CapEx) programmes in renewables. Given the predominance of conventional fuels among these companies, it seemed time to ramp up the green power share in their overall portfolios. However, there are vast differences country-by-country and firm by firm and, from a UK perspective, the grass is really greener on the other side (of the Channel that is).

The WWF recently published a study on the UK's utilities' performace in carbon abatement. In that, Scottish Power ranked top, thanks to its significant upscaling of renewable energy investments. Looking at the numbers this looks justified - Its US subsidiary PPM will invest a whopping $2.1bn (£1.06bn) in 3,500MW of new wind farms over the next four years. On top of that, £1.6bn of new investment will be spent in the UK in the Energy Wholesale division, of which a significant though not specifically published sum will be spent on renewables.

Given that Scottish Power plans to spend a total of £3bn on CapEx in all its divisions, and conservatively assuming that one third of the Energy Wholesale money will be spent on renewables, this means that about 50% of all new investments go towards green energy, a truly laudable figure. This even tops the sector average in Spain, where electric utilities plan to spend 31% of CapEx over the next 3 to 5 years on renewables. The total sum in Spain is at least €8.75bn (£5.75bn). I have already argued in another post that the likely synergies in the renewables business are one of the reasons that Iberdrola of Spain was willing to open its pockets to buy Scottish Power - and the numbers bear it out!

However, apart from these front runners, the investment taps are pretty dry, especially when seen in the context of the overall investment programmes in conventional generation. These days, E.ON and RWE of Germany only publish aggregate figures for all parts of their business, hence their British subsidiaries are subsumed here. Out of a massive €16.3bn (£10.7bn)  investment programme in fixed assets, E.ON has set aside a mere €0.9bn (£0.59bn) for renewables over the next three years-across the whole of Central and Eastern Europe, as well as the UK! Similarly, RWE provides a modest €650m (£426m) for renewables between 2006 and  2011, while it is motoring ahead with approximately €17.5bn (£11.5bn) of investments elsewhere.

Vattenfall of Sweden, the owner of Germany's third largest utility, grandly announced the 40Twh of green electricity by 2016 initiative last year, underpinned by 40bn SEK of CapEx. However, once you disentangle these numbers and convert Swedish Krones into Pound Sterling, you end up with a modest £1.15bn investment programme until 2010, mostly into large Swedish offshore wind farms, while 104bn SEK (£7.5bn) are going into conventional generation.

In summary, while utilties in some countries (namely Spain) nowadays see renewables as core to their business and reflect this in their investment plans, others are happy to continue the greenwash while hiding their renewables investment in the appendix to their coal powered Capital Expenditure programmes. Sometimes, it is worth having a look behind the numbers.

The physics of society

The study of energy markets is dominated by ‘neo-classical’ economics, though its critics are growing in number. A basic critical starting point is often levelled at the way in which neo-classical economics considers itself a discipline that can, and should, operate in separation from other social sciences. However, in order to appreciate why this should be, it’s necessary to first summarise the methodological approach of dominant or ‘mainstream’ economics. Broadly, neo-classical analyses aim to develop an all-encompassing and invariable model to describe and justify observable ‘outcomes’, and, by basing all studies on fixed methodological axioms and assumptions, the argument is made that they suffer major weaknesses (Fullbrook, 2003; Hodgson, 2001) Below are summarised the three key ‘meta-axioms’ of neo-classical economics:

Methodological Individualism

The assumption that explanations for socio-economic outcomes must be sought at the level of the individual agent.

Methodological Instrumentalism

Or the principle of universal rationality: the idea that all agent behaviour is preference-driven which gives rise to the idea of homo economicus – the assumption that all behaviour is in some way ends-driven.

Methodological Equilibration

The assumption that agents’ instrumental behaviour is coordinated in a manner that aggregate behaviour becomes sufficiently regular to give rise to solid predictions.

Adapted from Arnsperger and Varoufakis (2006) and Boyer (2002)

Making explicit the above-mentioned axioms is necessary in order to understand the discursive power of neoclassical economics, as they are rarely debated or questioned in mainstream studies. Critics have made a number of recent contributions to a debate which aims to challenge dominant neo-classical analyses of capitalist economies by arguing that geographical, historical and cultural variables can account for the rise and crisis of particular economic and social outcomes (Peck, 2004; Peck and Tickell, 2002). This is based upon viewing any given market as embedded in a complex of institutional arrangements which situate the rationality of agents’ decision making by viewing both information and behaviour as a product of the institutional structure, rather than viewing individual agents as operating in a rational ‘void’. Jessop (2002) highlights the value of rejecting the methodological individualism of neo-classical analyses as they assume ‘exchange relations are entirely driven by the optimising, economising behaviour of preconstituted rational individuals with pre-given and stable preference functions who then orient their actions exclusively to the price mechanism’, which is the idea behind homo economicus.

Indeed, all ‘Marxist’ analysis is based upon a rejection of the most fundamental assumptions of neo-classical economics. Building upon the seminal work of Hegel (1770-1831), Marx developed his thinking that all economic, social and political life exists in a constant process of transformation; as one set of relations assumes authority, another with rise to challenge it (Galbraith, 1987). This idea forms the basis of critiques of the concept of general equilibrium which, conversely, implies a view of economics as if it were the physics of society, pursuing knowledge of a ‘fixed and final’ subject matter (Galbraith, 1987; Ormerod, 1999).

Are we heading for a fresh debate of old arguments, or is Marxist thinking truly dead? And what are the implications, if any, of these shortcomings in current economic thinking for the energy markets that have been thrown into turmoil in recent years?

Whither CO2 trading?

While in theory there should be no difference between implementing a CO2 trading scheme and a straight CO2 tax, in practice, the devil lies in the detail. And as is now increasingly clear in the case of the EU emissions trading scheme, the details can go horribly wrong.

Let's have a look at some of the perverse incentives that the EU trading scheme created in practive: Veli has already outlined the volatility of the market, due to a lack of transparancy and much political tinkering with individual quotas. However, what has been missing from the debate so far is the fact, that it has actually achieved the opposite of what it was designed to do - utilities are building more coal plants!

One of the features of the EU market design is that current polluters receive most of their  permits for free. This is supposed to decline over time, to induce cleaner behaviour, but evidence suggests that lobbying by the biggest polluters resulted in an over-generous allocation of pollution rights. And as emission allocations are often based on past emissions, there is a perverse incentive to companies, as any reduction in emissions today will mean less permits in the next round of free allocations. Only the auctioning of permits can reduce such incentives, but this will create even greater uproar among lobbyists.

However, the peak of perverse incentives is actually reached with the provision of free allocations for newly built plants. This means that if I built a zero-carbon power plant, I will get no permits to reward my clean investments. If I build a fossil-fuel plant instead, I will receive a large chunk. But moreover, these free permits do not even discriminate between different carbon contents of fossil fuels! In Germany, for example, a new coal plant will receive enough free permits to cover its first 14 years of operation at 85% availability. No wonder then that just 1% of wind energy is operated by the big utilities in Germany, while plans are drawn up and down the country for new coal plants.

If the emissions trading scheme is not fixed, it should be scrapped as it actually does more harm than good. Introducing a European-wide CO2 tax might require investing much more political capital upfront, but at least, there will be much less scope for tinkering with it afterwards!

Chemurgy vs. The Regrettable Medievalists

To continue the biofuels theme, I’ll draw your attention to something I read on the subject at the weekend:

"When an automobile is propelled by the combustion of gasoline containing 10 to 15 per cent alcohol its road performance is found practically the same as when gasoline alone make up the fuel.

"Nothing is to be so regretted as the writings of medievalists portraying the utter impossibility of agriculture being able to supply the fuel requirements of this world when once the petroleum fields are depleted. As a matter of fact, this country can easily supply all of our fuel requirements from our waste lands alone.

"Coal and petroleum constitute a legacy to us from the flora and fauna of aeons past. It would seem fitting, therefore, that we waste them not now in profligate living, but permit a reasonable carry-over for future generations."

Familiar stuff, I’m sure you’ll agree about that. True, it’s another contribution to the ongoing eco-promotion of biofuels, but this time with a twist. It was written in 1934 by the Chair of the NRC’s Chemistry and Chemical Technology Committee, the husband of an heir to the Dow Chemical fortune. The book The Farm Chemurgic espoused greater use of renewable products in fuel and chemical products, and was part of a movement spearheaded by Henry Ford, Thomas Edison and Irenee Du Pont. Their intention was to increase production of ethanol for motor fuel and in doing so facilitate displacement of petrochemicals by bio-based materials such as bioplastics and pharmaceuticals.

Compare this with recent developments in the US and the parallels are obvious. The President’s Biofuels Initiative is driving at cost reductions for cellulosic ethanol to replace 75% of oil imports by 2025 and 30% of current fuel use by 2030. The Biomass Roadmap foresees replacement by bio-based materials of 12% of chemical commodities by 2010 and 25% in 2030. The chemurgists of the 1930s were concerned about agricultural overproduction, increasing agricultural imports, and the threat of agricultural unemployment. With current weakening demand for US farm products due to lower global prices and pressure to reduce tariff restrictions, the present situation bears similarities.

The response of politicians to demands for increased use of non-food crops was just as positive in the 1930s as it has been today. The difference is that where increased employment and technological gains were promoted in pre-War America, environmentalism is today’s cause célèbre. The underlying motives on both occasions, however, are seemingly independence of materials, technology, and guaranteed markets for American products. This makes it interesting to note that ‘chemurgy’ failed spectacularly as soon as the US became a world-leader in petroleum products during WWII, in large part due to the discrediting of ethanol fuel by the oil majors.

The promotion of agricultural products to replace fossil fuels is nothing new and its success may once again be unconnected to technical feasibility. As early as the Model A, Ford cars were equipped with an adjustable carburettor designed for alcohol as well as gasoline. More than 21,000 tons of soybeans were used to make the plastics that went into Ford cars in 1940. In 1941 Ford unveiled a car whose body was 70% cellulose. It needed no painting or polishing. Minor bumps sprang back into shape. The cellular organic material was cooler in summer and warmer in winter than its steel equivalent. It also reduced noise (Morris, 2002). But the failure of bioethanol in the fuels market also signalled the death of bioplastics in the materials market.

My PhD research looks at use of energy products in the chemical sector past, present and future. I hope to explore the links between energy production and chemical production, and whether these links should be exploited to assist the introduction of sustainable fuels and products, i.e. via ‘biorefineries’ producing biofuel and chemicals.